The Chhattisgarh High Court, comprising Chief Justice Ramesh Sinha and Justice Arvind Kumar Verma, has quashed an FIR registered against Dr. K.V.K. Rao under Sections 406 and 420 of the Indian Penal Code (IPC), ruling that the matter was purely civil in nature and the continuation of criminal proceedings would be an abuse of the legal process.
Background
The case arose from a complaint lodged by Anil Kumar Goyal, who alleged that his firm M/s. R.K. Engineering entered into an agreement with the petitioner, proprietor of M/s. Kedhari Traders, for the sale and purchase of power plant equipment on an “as is where is” basis. Goyal claimed that Dr. Rao received ₹7.5 crore but permitted lifting of scrap worth only ₹1.89 crore, later refusing refund and demanding more money.
The FIR was registered on 30 May 2019 at Police Station DD Nagar, Raipur. Dr. Rao subsequently filed a petition under CrMP No. 402 of 2022 seeking quashing of the FIR and all proceedings.
Petitioner’s Arguments
Dr. Rao, represented by Advocate Amit Buxy, submitted that the dispute was commercial and contractual in nature, governed by an agreement dated 14 August 2018. He argued that Goyal failed to adhere to the payment schedule — ₹10 crore by 15 September 2018 and another ₹5 crore by 15 October 2018 — making only partial payments totalling ₹7.5 crore. Following defaults, a termination notice was issued under Clause 11(b) of the agreement.
Dr. Rao contended that the FIR was lodged two and a half years later, after no prior civil challenge was raised against the termination, and was intended solely to pressure him into refunding the amount. He emphasized that the agreement contained specific arbitration and jurisdiction clauses, with Hyderabad and Goa being designated forums, not Raipur. He maintained that there was no dishonest inducement or entrustment to constitute offences under Sections 406 and 420 IPC.
Court’s Analysis
The High Court reiterated that criminal proceedings can only be pursued when allegations constitute a prima facie cognizable offence. Citing Rikhab Birani & Anr. v. State of Uttar Pradesh & Anr., 2025 SCC OnLine SC 823 and Sharif Ahmed v. State of Uttar Pradesh, 2024 SCC OnLine SC 726, the Bench emphasized that mere breach of contract or failure to pay cannot automatically amount to criminal offences unless fraudulent or dishonest intention at the time of the agreement is established.
Referring to the Supreme Court’s decisions in Vinod Natesan v. State of Kerala, (2019) 2 SCC 401 and Sachin Garg v. State of U.P., 2024 SCC OnLine SC 82, the Court observed that giving criminal colour to a civil dispute by selectively quoting terms from the penal code is impermissible.
The Bench remarked:
“When there is a comprehensive remedy of arbitration clause under the Regulations, a case which is of civil dispute cannot be converted into a criminal dispute, it would be an abuse of the process of law.”
Decision
Finding the complaint to be purely contractual and civil, the Court held that continuing the criminal proceedings would serve no legal purpose and only cause harassment. Accordingly, the FIR No. 0187/2019 registered at PS DD Nagar, Raipur, and all subsequent proceedings were quashed.
Case Title: CrMP No. 402 of 2022, Dr. K.V.K. Rao v. State of Chhattisgarh & Ors.
